How much would you borrow?

Plans_all_plans

Hi all

We are FTB and have a 3 yr old. One wage of 15.5k and I'm a stay at home mum. We have a 40k deposit. Halifax will lend us 78k (over 25 years) on the one wage, but we are thinking borrowing so much is risky given our circumstances. First question: do you agree?

We think borrowing 60k to get a 100k max price house is the best course of action, but the problem is that houses in the 100k price bracket are not of a good standard.

Second question: would you extend the mortgage term to get a better house, given that I will be going back into work in approx 5 years time?

Any thoughts greatly appreciated. We are undecided on what to do.

Fire_Fox

Do you not think you can afford a mortgage of that size? Do you know where every last tenner of your current income goes? Why five years, do you plan to extend your family? What are DH's prospects for payrises? Have you considered working from home - mystery shopping, childminding, dog walking, etc.? Have you considered getting a three bedroom and taking in a lodger - foreign language student, Mon-Fri business person, trainee nurse? I am assuming you both are fairly young, so extending the mortgage term is not necessarily a bad idea.

Plans_all_plans

Thanks for replying. Well I think borrowing 60k is affordable, but I'm not sure whether borrowing right up to the max of 78k would be! We have no debts and the mortgage broker said we had a perfect credit score. We are 24 and 26.

On the bank's budgeting sheet, taking into account their figures for gas/council tax/food/internet/phone/everything else etc, it said we would have £200 spare cash at end of month left over, if we took out a 60k mortgage. We do not have a car and have no plans to get one.

We are getting married shortly and so would like another child together once we've tied the knot, this is why I will be out of work for a while longer once the second child is born. (I am actually looking for something part time at the mo tho as our daughter is due to start nursery part time this Sept)

If we borrowed say 70k, I worry that we might start to struggle and I really dont want to put any future children into childcare if we did struggle and I had to work. I'd rather put up with a smaller house in the first place.

Is 70k a massive amount to borrow on our income?

Fire_Fox

TBH your income is very low to be thinking of homeownership full stop, especially with (eventually) two kids. These days most don't borrow more than three times their joint income, which leaves you with a £90K or less house (don't forget all the fees). I assume the lender is willing to take a risk as you have a large deposit and no debts.

Unless your OH has prospects of climbing the career ladder I think you need to be looking to increase your income, but that does not have to mean putting children into childcare. Being out of work for eight years is a long time, would you consider registering as a childminder? That would give you skills which could be transferable into work at a later stage. How do you feel about a lodger - we had them my whole childhood and it was brilliant.

I don't know what you think that £200 needs to cover, I was expecting you'd be going on your current outgoings - do you not know what you spend? This budget planner covers pretty much everything, right down to Christmas and haircuts:
http://www.makesenseofcards.com/soacalc.html
I don't have a car either, I don't really understand why so many do as they are absolute money pits!! :huh:

LilacPixie

I personally feel you would be cutting it fine. A 78k mortgage would be around 470 a month on a repayment basis. In addition to that you would have council tax, utilities, insurances not to mention general living expenses. Your OH will only be earning around 1k a month after taxes.

WHat would you do if something breaks down or bursts??

Plans_all_plans

Thank you for your thoughts Firefox. I realise that our income is low to be thinking of home ownership, but renting here is as expensive as buying, so we think long term we're better off buying.

My fiance has asked for a rise at work which would take him to 19k if he was successful, but this would take time to go through anyway as he works in the public sector and they are slow at things like that. A lodger is a consideration, but it's not something we've properly spoken about, so we will need to discuss this.

Well the £200 needs to cover presents/savings for emergencies/holidays (a distant dream I fear!!) etc. I can do without a haircut for a while! I will look over the budgeting link you've sent, thank you.

I would not be happy to be a childminder, purely because I feel unable to discipline other people's children if necessary. We are both graduates (I also do a lot of volunteer work in the evenings) and I feel my prospects for employment will be good once I return to work, it is just these early years when children are growing that will be the problem.

Is extending the mortgage term the best course of action in your opinion? I am wary of doing this, but it has been duggested to us and we are not sure if it is a good idea or not, so other people's opinions are helpful!

cashbackproblems

On 60k if you monthly repayments are £470 you might just scrape by, but on any more youd struggle! However ultimately rent for a house will be the same so you are better off getting your own place, have you looked at apartments for 2/3yrs until you can save more as you might get a better standard of accommodation?

As youv mentioned your best bet is to get a part time job then you can easily stretch to borrowing the full amount.

Personally i find it shocking how ppl live without a car (unless your in london), its more essential than food for me
!

Fire_Fox

You have a good deposit so you are not risking negative equity, which is great. :T If you are buying a forever home then yes, at your age I would say you could extend the mortgage term, with a view to overpaying the mortgage as your income increases. The best course of action to my mind is to increase your income substantially as to me that is where the problem lays, there are many ways to work from home.

£15K to support a family of four in any accommodation is very low, presumable you also get child benefit, are you entitled to any working tax credits or child tax credits? Would you be if you got a part-time job or if you bought the house?
https://www.entitledto.co.uk
LilacPixie makes a good point about the relationship between your mortgage and your income, IIRC if your mortgage plus council tax is more than half your income, the debt charities consider that high risk.

This forum is just amazing - check out the 'Gambling Loopholes' (matched betting, a system not a risk), the 'Up Your Income' board, the 'Mortgage-free Wannabe' board, Old Style .... see what others are doing to make money flow in. Also think about going vegetarian, growing your own fruit and veg, challenging yourself to keep energy bills low, going on the Sun newspaper £10 holidays, getting your hair cut at a hairdressing college, making some of your own Christmas presents or having an extended family challenge to spend as little as possible ...

Plans_all_plans

On 60k mortgage, repayments are £323 on repayment mortgage on the deal we have been offered. Our low LTV helps us get best rates.

Lilac: apartments are dearer here than houses. We are looking in very specific area as we dont have the car and need to be near family etc and yes it is tough, but we manage!

Firefox: we get working tax credit of £100/month and child tax credits of £212 a month. Plus child benefit of £80 a month.

Thank you for all your ideas and input, they have been very helpful.

Fire_Fox

cashbackproblems wrote: »

Personally i find it shocking how ppl live without a car (unless your in london), its more essential than food for me
!

I don't have children, so cannot comment on that but at 37 I have rarely found not driving a problem. One of my criteria when choosing where to live is decent public transport links - presently I live in a flat that I bought as a BTL which happens to have numerous bus stops literally on my doorstep and is three minutes brisk walk from TWO rail stations.

I don't understand why someone would choose to drive to work, sitting in the SAME traffic jam as my bus, when I can read or text my mates or sort through the morning's mail (!). Or why you would want to drive for a weekend away instead of sitting in a pre-booked seat surfing the net with a glass of British Rail wine. :beer: Yes trains can be delayed but cars get stuck in traffic: I can claim a 25% refund.

I go to the supermarket on foot or by bus, and travel home by bus or taxi or occasionally get my groceries delivered. I visit my relatives by train, and my mother takes me to the Recycling Centre and to IKEA in her car every few months. :cool: On a night out I travel on foot or by train and home on foot or by taxi (hammered). Eeeerrr what else do you need a car for??

cashbackproblems

Fire_Fox wrote: »

I don't have children, so cannot comment on that but at 37 I have rarely found not driving a problem. One of my criteria when choosing where to live is decent public transport links - presently I live in a flat that I bought as a BTL which happens to have numerous bus stops literally on my doorstep and is three minutes brisk walk from TWO rail stations.

I don't understand why someone would choose to drive to work, sitting in the SAME traffic jam as my bus, when I can read or text my mates or sort through the morning's mail (!). Or why you would want to drive for a weekend away instead of sitting in a pre-booked seat surfing the net with a glass of British Rail wine. :beer: Yes trains can be delayed but cars get stuck in traffic: I can claim a 25% refund.

I go to the supermarket on foot or by bus, and travel home by bus or taxi or occasionally get my groceries delivered. I visit my relatives by train, and my mother takes me to the Recycling Centre and to IKEA in her car every few months. :cool: On a night out I travel on foot or by train and home on foot or by taxi (hammered). Eeeerrr what else do you need a car for??

Unless your in london (even then its not perfect) it makes your life harder, but then i guess it depends on the individual. Where i live the bus takes 40min to get into town and 10min by car, if at the weekend i want to visit my mates i would have to switch 2 buses taking 1hr+ (plus walk 15-20min from stop to their house), but in the car it takes me 15min and i can get door to door. Just thinking about day to day tasks like shopping, going to doctors, going to the gym etc it wouldnt be practical using public transport. Like today i went from Bham to Leic by car taking 1hr10min, by train (which iv done before) would take 3hrs from my door to my gfs door and that includes paying for a taxi from leic station to her house and back again.